A gory cashflow model is a useful cashflow model – the bloodier the better


At a monthly review with an MD recently we were working on managing cashflow and thinking perhaps the company accountant was being too optimistic.

Essentially, things could be worse!

And if they were going to turn out worse than expected then what did that mean for the business and what could be done to manage the situation?

Managing cashflow – who needs to?

Businesses tend to fall into two categories:

  1. Those that need cashflow models
  2. Those that don’t (usually because they’re well funded and cash just isn’t a problem)

If you’re in category 1 (most businesses!) then you need your cashflow model to be realistic otherwise it simply isn’t useful for you.

The bloodier and gorier it is, with all the realistically possible crunch points included, the better.


Because it forces you to deal with the problems and will help you to navigate turbulent times successfully.

What does a cashflow model look like?

Essentially it’s your bank statement looking backwards and forwards.

Month by month you summarise receipts and payments and the difference between the two is the net cash flow for the month.

Add the net cash flow for the month to the balance brought forward at the end of last month and you have the balance carried forward to next month.

When you create your cashflow model – go backwards for six months before you start to forecast the next six and your model will be much more realistic.

Keep on adding in the actual cash flows for each month as you move forward so you are always building your forecast on top of what actually happened.

Example of a cashflow model

Business decisions drive cashflow

You probably can’t rely on your bank to save the day so it’s down to you, your team and your business to:

Running a business is certainly not easy but if a realistic cashflow model should be front and centre and isn’t then get on top of cashflow before cashflow gets on top of you.

Michael – @bluedotmichael

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